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6.4 pm
Mr. John MacGregor (South Norfolk): It is a real pleasure to follow the hon. Member for Birkenhead (Mr. Field) in the debate. He has made a substantial, thoughtful, constructive and mainly non-partisan contribution to the discussion of pension issues. I shall return to his position in a moment.
I must declare an interest in the debate as I have just become a non-executive director of the London and Manchester insurance company. That appointment reflects my much wider life-long interest in the encouragement of individual savings, especially long-term savings and pensions. I was not able to express my interest when I was in the Government because, apart from spending some time in the Treasury, I did not have direct responsibility for such matters. Since leaving the Cabinet, however, I have been able to address those issues. I wrote a pamphlet, "Pensions in the 21st Century", for the Centre for Policy Studies last year, which covered many of the issues that we are debating today.
Mr. Deputy Speaker, you were critical of a number of Conservative Members for constantly seeking to intervene during the speech by the hon. Member for Peckham (Ms Harman). I am sorry that she has left the Chamber. I have rarely heard a speech that was so vulnerable to criticism, which is why we tried to intervene. She must
have been very much aware of that, because she failed to give way. I only hope that the shadow Chancellor, the right hon. Member for Dunfermline, East (Mr. Brown), saw her speech in advance as it was typical of many Labour Front-Bench speeches.
By criticising the current pension provisions, the hon. Lady implied that, if returned to government, the Labour party would give pensioners much more through either higher pensions or greater income support. However, she did not mention how Labour would pay for it. When asked how much her policies would cost, she replied, "We are talking about an entitlement." Like her other responses, that did not answer the question. It was old Labour writ large: make promises, pretend to be able to make provision, and claim that the issue of cost does not need to be addressed.
There is a big bill attached to the hon. Lady's remarks today. I draw attention to two points that she failed to answer. First, she criticised the fact that a number of pensioners who are entitled to income support are not receiving it. She argued that Labour would introduce measures to ensure that they did so. The Anson report, which was commissioned by the National Association of Pension Funds, discusses that issue. The operation would clearly involve a big bill--somewhere between £1 billion and £2 billion at present--and the hon. Lady did not say how it would be paid for. There would have to be corresponding cuts elsewhere if the shadow Chancellor's pledges were to be realised.
Secondly, and even more significantly, the hon. Member for Peckham refused to answer the question from my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). I had intended to raise exactly the same point in my speech. I was much struck by the fact that when my right hon. Friend asked his question, the hon. Lady retreated into a woolly answer about basic pension plus and the criticism of it by the NAPF. Basic pension plus is a completely different scheme for future generations: it looks ahead 45 years. My right hon. Friend inquired about the position of existing occupational pension schemes and personal schemes, which are separate from basic pension plus. I suspect that the hon. Lady realised that because when my colleagues and I tried to intervene to repeat the question, she refused to give way.
What is the Labour party's position on encouraging occupational pension schemes? Does it intend to change the tax arrangements? That is extremely important, for reasons that I shall explain later in my speech. Although the shadow Chancellor said that Labour would not increase the basic or higher rates of tax, there are many other reliefs and allowances that could be tackled to meet the bill that a Labour Government would undoubtedly face. Are we talking about one of them? If so, we face an extremely serious position which means that the Labour party is flying in the face of everything that it has been saying about the encouragement of occupational pensions.
It is clear that the hon. Member for Peckham cannot come to terms with new Labour. The hon. Lady utters the old phrases but cannot explain how new Labour would fit in with the commitment that Labour would not spend more. That shows the pressures that the right hon. Member for Dunfermline, East would face as Chancellor if Labour ever took office.
My tribute to the hon. Member for Birkenhead was genuine. It is important and increasingly encouraging that the debate about long-term pension issues is becoming a cross-party issue. Indeed, among all those interested, we are beginning to arrive at the same sort of conclusions. That is because we all recognise the nature of the problems and challenges that we face. There is general agreement about those and I need not repeat them. I have in mind the demographic challenge and the inability of the state to meet the bill. We all seem to agree that the United Kingdom is much better placed than the rest of the European Union. I am glad that we are coming together on the issues. The hon. Member for Birkenhead has made a notable contribution in bringing that about.
It seems that basic pension plus is not so much a switch to compulsion--because it will be replacing a state pension scheme and state earnings-related pension scheme which are compulsory unless the person has opted out--but is instead a funded contribution. It is the funding switch that is so significant, but up to now it has eluded us in most of our thinking. I hope that the hon. Member for Birkenhead will agree that that is a major element in the proposed change.
Those of us who are engaged in the debate are beginning to agree on the problems, along with the background and the challenges, and on the solutions. I hope that the hon. Member for Birkenhead will agree and forgive me for saying that that is a tribute to Conservative policy over many years, and to the extension of wider ownership and personal responsibility in which we Conservatives have always believed and encouraged in so many ways.
I so much agreed with my right hon. Friend the Member for Sutton Coldfield when he referred to basic pension plus as the latest in a series of measures designed to respond to longer-term problems in a Tory context. He made a notable contribution to those measures. Indeed, a long-term approach is significant when evaluating basic pension plus as politicians are frequently accused of thinking only in the short term.
The Government have done much in the long term, not least with the measures that we have taken to equalise the state pension age. We now have a classic illustration of a Government who are prepared to think really long term in addressing the problems that will face future generations unless we act now--and if things are to be done properly, we must act now. That is a notable feature of what is now being proposed.
The proposal may not be of major excitement and significance to many people in the forthcoming general election, but in the long term it will come to be recognised as a significant step forward. I therefore pay tribute to my right hon. Friend the Secretary of State and to those who work with him for producing what I regard as thoughtful, objective and far-seeing proposals which are skilful in their solution of the double-funding problem that was facing future younger generations. We have not always known how to tackle that problem, but my right hon. Friend has arrived at an ingenious way of responding to it. Some details are outstanding, but basic pension plus offers a hopeful way ahead.
There are three packages of issues to which I shall refer. First, I have two questions about basic pension plus. I do not want to take up many details because we are all beginning to become familiar with them. These details
may well be taken up in later and wider consultation. I was struck, however, by a response to questions and answers about "whether my spouse will still be okay if I die". Part of the answer to that question was that the funds of those in the new scheme who died before drawing any money purchase benefits would be inherited in full by the surviving spouse, or by the estate where there is no spouse. That is interesting and significant. The response tells us that some or all of the funds would have to be used to purchase an annuity, or that income could be withdrawn.
I hope that that thought will be developed. As we look ahead to the need for pension flexibility, it will an important element of basic pension plus and may lead to a reconsideration of what we are doing about personal pensions.
The editor of Financial and Tax Planning Through Pensions--a journal which I have never read and did not know of--wrote a letter which appeared in The Times to which one of my constituents drew my attention. At the end of the letter, the writer suggested that anyone who took a similar view should write to their Member of Parliament and an assiduous constituent of mine did so. The letter in The Times stated:
"Whilst annuities can remain as the ultimate income provision for those who are security conscious there is no real reason in these days of investment sophistication why pension holders should ever have to annuitise their funds . . . The legal and practical objections to eliminating compulsory annuity purchase are quite slim. A tax adjustment could be made on the ultimate passing out of the pension fund to the family of a deceased member, if this were thought appropriate."
We can all identify some of the difficulties and we can all understand that as tax reliefs were given on pension contributions it is important that there is some assurance that the funds are used to fund pensions and not merely frittered away with the result that the individual goes on income support or whatever. It is clear that there must be some conditions. On the other hand, we must consider how there can be greater flexibility in the provision of pensions.
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